Good governance key to keeping India growth story intact: RBI

Published: Friday, November 25, 2011, 13:15 [IST]

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Chandigarh, Nov 25: Concerned over the economic slowdown, RBI Governor D Subbarao today (Nov 25) outlined the 10 challenges to keeping India's growth story intact and asserted that "providing good governance" would be critical in this regard.

There may be several challenges to acceleration of growth, he said, adding that identification of these areas and drawing up plans to address them is the relatively easy part.

"What is infinitely more difficult is the translation of those policies into action," he said.

Among the 10 challenges, he said it would be imperative to bring inflation down to 5 per cent or even lower to regain the growth momentum and accelerate the rate further.

He said a high inflation scenario makes both savers and investors uncertain and there is a need for a stable macroeconomic environment.

Emphasising on the importance of a stable macroeconomic environment, he said the fiscal deficit needs to be controlled and inflation must come down.

"The first is reduction of fiscal deficits... The second task is to bring inflation down first to 5 per cent and then even lower (for stable macro-economic environment)...," he said.

The governor said the current inflationary woes are a consequence of both supply shocks and demand pressures.

Maintaining that the RBI's monetary tightening policy has been aimed at restricting demand and anchoring inflationary expectations, he said, "This has to be supplemented by supply side responses to raise the potential output of the economy."